I've written about Brazil pre-Lula and post-Lula and spent the last five years covering all aspects of the country for Dow Jones, Wall Street Journal and Barron's. Meanwhile, for an undetermined amount of time, and with a little help from my friends, I will be parachuting primarily into Brazil, Russia, India and China. But will also be on the look out for interesting business stories and investing ideas throughout the emerging markets.

China Foreign Debt Approaches $1 Trillion

The amount of debt China owes foreign lenders — to those who are inclined to believe what the government says — is approaching the $1 trillion market. It will be there, if it is not already, before the end of the year.

As of March, it hit $764 billion, up from $736 billion in February, the State Administration of Foreign Exchange said on its website on Friday.

Outstanding short-term foreign debt, due within one year, rose to $565.68 billion from $540.93 billion at the end of last year.

The country has over $3 trillion in cash reserves. More than enough to service its borrowing or wipe it out entirely and still have a few trillion left over for a rainy day.

China is not a large overseas borrower, but is seen increasing its use of foreign capital markets in the years ahead as the economy matures. By comparison, the U.S. total debt obligations are over $17 trillion. It is unclear exactly what are China’s overall debt obligations.

Investors have bee mildly concerned over China’s debt levels, from federal to municipal to corporate debt. This year, for the first time ever, a Chinese solar company defaulted on a $531 million debt. Suntech Power is now in bankruptcy protection.

Over the last week, China investors got another scare with the People’s Bank of ChinaBank of China, their central bank, said it would not be helping out small to mid-sized lenders who took on too much credit risk. The market panicked. Stocks fell. And then the Bank said that it would indeed help with liquidity where needed, and has even offered banks some cash protection over the last forty eight hours, according to published reports quoting Central Banker Zhou Xiaochuan.

On Saturday, the Chinese Banking Regulatory Commission smoothed over the liquidity crunch concerns when it added its voice to the chorus and said that there was adequate reserves set aside at banks to cover problems with non-performing loans.

Commission chairman Shang Fulin said the recent liquidity crisis — which sent money market rates soaring to 11% in a country used to rates around 3% — would not affect the stable operation of Chinese banks. He acknowledged that some banks needed to improve their liquidity and risk management and promised to strengthen regulation for wealth management products and commercial banks. He urged banks to improve transparency of the wealth management products being offered, which suggests an ongoing concern in the capital city with municipal level shadow banking and investment that invests pension fund money into government pet projects and assets that have zero return.

All is clearly not well in China banking. But many close China watchers at banks like BarclaysBarclays Capital believe the country can weather this. They have faith in China regulators and Beijing leaders to keep financial problems under control.

Huang Yiping, chief economist for Barclays in China, described the economic policy framework of Premier Li Keqiang as “no stimulus, de-leveraging and structural reform”. These are key components of what Huang calls “Li-Economics”.

“We think Li-Economics is exactly what China needs to put its economy on a sustainable path, which we estimate is around 6 to 8 percent annual growth for the next 10 years,” Huang said during the Global Think Tank Summit in Beijing this week.

China has resisted calls for more stimulus. The markets have been betting on it and never got it. It’s been one of the reason why Chinese equities have been such a bore all year.

The iShares FTSE China (FXI) exchange traded fund is down 19.6% year to date, the second worse performing BRIC market after Brazil. The iShares MSCI Brazil (EWZ) is the worst, down 21.58% YTD. All of the BRICs are underperforming the MSCI Emerging Markets Index so far this year.

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Oh my god, china owes 1 trillion, oh I forgot the USA owes 16 trillion looking forward to 29 trillion in four years and yet with similiar GDP we are okay and the Chinese are going down the tubes. Something is wrong with the writers braincells.

No. Something is wrong with your reading skills. Never did this say that China was goin down the tubes. It pointed out that the US had $17 trillion, not $16 trillion in debt and that China had over $3 trillion in reserves, enough to pay its debt service, or pay all of those debts and still have $2 trillion in reserves. It said that the country has some banking concerns, which the government itself admits to. My brain cells are quite fine, thank you. At least that is what my doctor told me after my lobotomy. He showed them to me. And I saw them.

In addition to foreign debts, there are huge liabilities. Commi China is a closed society, all foreign currencies must convert into RMB, and the commi gets to keep foreign currencies, that’s how the 3 trillions “reserve” comes from, but it’s not commi’s money.

When hot money flees, foreign investors pull out….the 3 trillion dollars are insufficient to meet all these liabilities. One study shows that the commi actually are deeply into red in foreign “reserve”.

The government of the United States should be OVERTHROWN or FIRED from office fo irresponsibly burying this country in debt and failing to secure the borders to protect the citizens and the Sovereignty of this nation. The corruption, lobbying, waste, and abuse have given this country a grim future and destroyed the trust of the people in their leaders.

We have been buying more than we sell for 37 years straight. Our decline accelerated after the asinine Vietnam war debt and Nixon’s petro-dollar scheme. In just the last 2 years, we have bought $1 trillion MORE from the rest of the world than we have sold. Oddly, Socialist China’s State Owned Enterprises are kicking capitalist ass on trade by, get this, INVESTING IN THEIR COUNTRY.

Its hard to really know what they owe in foreign debt. Many investors dont trust any figures coming out of China. Still, weve got to follow SOME numbers and those are what we have to work with. The debt looks high, but I think their GDP — off top of my head — is around $9 trillion, so less than 10% debt to GDP ratio for FOREIGN debt.

I’m pretty sure this article is wrong about one thing. It says US foreign obligations are 17 trillion. Our total national debt is 17 trillion, but hardly all of it is foreign debt. In fact, I think less than 50% of it is foreign debt.

everybody burns their hands quite a bit in usa big meltdown. everybody is watching their hands in europe sovereigns defaults crisis. it maybe the time of expanding your businesses, but cautious is priority, n this is a slower time with many clients. china while leading on many products, ie., solar panels, should set a standard for themselves n the world, the way china products lack, fix standards, repairs, replacement of parts. then maybe, this is the different time while r&d moves so fast, n setting standards may not be possible as stocks improve too fast, n prices low. it is believe the anti dumping tax is on as old fashion clients not happy with not able to repairs. actually, all products are so quality controlled, but not all users apreciate it, n read the instructions.

That’s another problem in China that the government allows them to easily default on debt especially to Foreign countries! The Banking crisis in China is most probably deeper than what most think and of course the Government will never show true figures!